As key stakeholders prepare for a sports betting hearing this week in Washington D.C., it is safe to say that the hearing will garner less attention than a more publicized one Thursday morning on Capitol Hill.
At 10 a.m. ET on Thursday, the U.S. House Subcommittee on Crime, Terrorism, Homeland Security and Investigations will convene for a highly anticipated hearing on the state of the legalized sports gambling market. The hearing inside the Rayburn House Office Building will take place less than a mile from testimony in Brett Kavanaugh's Supreme Court confirmation hearing, scheduled to begin at the same hour inside the Dirksen Senate Office Building. While a media firestorm is expected throughout the day outside the chambers, sports betting experts will be more focused on a bevy of key gaming issues that could arise down the street on Independence Avenue.
The hearing, entitled Post-PASPA: An Examination of Sports Betting in America, will be the first by Congress since the Supreme Court rocked the gambling world with a historic ruling in May. In a 6-3 vote, the Court struck down a quarter-century federal ban on sports gambling in the U.S. Ever since, a debate has intensified on whether the activity should be strictly regulated by the federal government or if the responsibility should be left to the states. Already, four states -- New Jersey, Delaware, Mississippi and West Virginia -- have legalized sports gambling over the last three months.
Five witnesses are scheduled to testify at the hearing including the Nevada Gaming Control Board Chair Becky Harris, NFL Executive Vice President of Communications and Public Affairs Jocelyn Moore and American Gaming Association Senior Vice President of Public Affairs Sara Slane. The hearing will be chaired by Rep. James Sensenbrenner, a Wisconsin Republican. The chairman is looking forward to hearing a cross-section of opinions from a wide array of witnesses on whether sports betting should be heavily regulated, a Sensenbrenner spokesperson said.
Here are some key issues to monitor during Thursday's hearing:
What is the likelihood that Congress will eventually impose a federal framework for the legal sports betting market in the U.S.?
This is the million dollar question that carries widespread ramifications over the next several years, as legalized sports betting proliferates around the country. Last month, Senate Minority Leader Chuck Schumer outlined a policy proposal aimed at creating robust consumer protections for gamblers and ensuring integrity in professional sports. A comprehensive federal framework that oversees the legal market will likely be embraced by commissioners in the Big 4 sports leagues, including NFL commissioner Roger Goodell. Shortly after the Court's decision, Goodell urged Congress to enact uniform standards for sports gambling, echoing the position of his counterparts in the other leagues.
Such a framework has been met with resistance from the American Gaming Association, a leading trade group for the gambling industry. The group, which supports 1.8 million jobs nationwide, instead favors policies that empower state and tribal regulations. Current regulations for other forms of gaming already address age restrictions, record keeping requirements, licensing and suitability determinations, Slane wrote in a Sept. 13 letter to Schumer's office. In addition, U.S. casinos are subjected to strict anti-money laundering protocols from state regulators in order to combat structuring attempts from organized crime networks, an activity that could prosper as the legal sports gambling market expands. Both Slane and Harris may inform committee members on a rigorous model in Nevada, where regulators continually strive to protect the safety of the market.
Mandates for gaming operators on the use of a professional sports league's official data
Over the summer, the NBA announced a historic partnership with MGM Resorts International that designated the company as the official gaming partner of the league. The deal provides MGM with access to the league's official data on a non-exclusive basis. In some respects, the access to the league's real-time data feed could give MGM a competitive advantage over competitors, namely with in-game wagering when speed is at a premium.
Schumer's proposal requires the use of official league data in determining betting outcomes, a provision that has been opposed by the AGA. As intellectual property creators of the data, the NBA believes it should receive proper compensation. The AGA, on the other hand, argues that there is "neither a need, nor a legal precedent" to mandate gaming operators to purchase data from the leagues. "Mandating every sportsbook contract with only one official data company will allow individual, preferred data providers to set inflated, non-competitive monopoly prices for their services," Slane wrote in the letter. Two states, New York and Missouri, have pending bills with language regarding the use of professional sports league data in determining sports wagering outcomes.
Societal effects of gambling addiction on Millennials and the nation as a whole
Schumer and Sen. Orrin Hatch, a co-author of the Professional and Amateur Sports Protection Act of 1992, have taken steps to address the epidemic of problem gambling across the nation. For its part, the AGA sides with Schumer in advocating for vigorous safeguards to adequately protect consumers.
John Warren Kindt, a professor at the University of Illinois, received inclusion on the committee's preliminary list but was omitted from a revised one on Wednesday. Kindt, who has written extensively on problem gambling issues, described sports gambling as a "gateway drug," to gambling addiction in a 2012 U.S. News & World Reports column. By legalizing sports betting, states can expose themselves to additional taxpayer costs for crime and the creation of new financial products that could lead to a potential "speculative bubble," he indicated at the time. The committee is scheduled to hear from Les Bernal, national director of Stop Predatory Gambling. Bernal's testimony could be watched closely by the leagues.
Curbing the influence of the Black Market
According to various estimates, Americans wager upwards of $100 billion annually on sports. The actual amount is difficult to ascertain given the complexity of monitoring betting patterns on the illegal, offshore market. Some gaming experts argue that high state tax regimes will simply push bettors away from regulated sports books back to the black market. The illegal market lacks consumer protections and threatens the integrity of sports, Rep. Dina Titus, a Nevada Democrat, wrote in a Sept. 25 letter to Sensenbrenner. Titus also took exception to a so-called integrity fee that some leagues have proposed in recent months. "Calls for integrity fees paid to leagues would chip away at state revenues and already slim margins for legal sportsbooks, hurting their ability to compete with offshore books and move more consumers to the regulated market," she wrote. The committee could also address implications of the Wire Act in the Post-PASPA era on the unregulated black market.
Response to palpable errors from pricing systems used by gaming operators to set odds
In an abrupt U-turn last week, FanDuel Sportsbook agreed to pay a small number of bettors who received erroneous odds of 750-1 on the Denver Broncos to defeat the Oakland Raiders on Sept. 16. For a period of 18 seconds, the book listed incorrect odds on the Broncos to win the game outright due to a pricing error. FanDuel initially declined to honor a $110 ticket that would have paid approximately $82,000, before changing its stance days later. Though palpable errors are well-documented in Europe, the incident represented the first time a legal book in New Jersey experienced a major gaffe since the state legalized sports betting. Legislators could be interested in the types of internal controls that books need to maintain to limit the occurrences.
